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Workplace investigations – losing privilege

The decision of the Federal Circuit Court in Bartolo v Doutta Galla Aged Services Ltd1 serves as a timely reminder that misconduct investigations carried out by lawyers and the documents produced under such investigations may not have the benefit of legal professional privilege.

In the Bartolo case, the Court found that the report resulting from an investigation by a law firm into the Respondent's employee lost privilege because the Respondent's pleadings relied on the recommendations made in the report. This case highlights the importance of separating the functions of fact-finding, providing legal advice and decision-making in the context of employee dismissal.

Facts of the case

The Respondent was the Applicant's employer. The Respondent's Board (Board) instructed lawyers to investigate allegations made against the Applicant and provide a report (Investigation Report). The law firm prepared and provided the Investigation Report for the Board's consideration. After reviewing the Investigation Report, the Board recommended to the Respondent's CEO that the Applicant's employment contract be terminated. The CEO decided to terminate the Applicant's employment and indicated in his affidavit that one of the reasons for doing so was based on the recommendations of the Board.

The Applicant then brought proceedings against the Respondent alleging that it took adverse action against him, which was in breach of section 340 of the Fair Work Act 2009 (Cth) (Act). The Act requires the employer to prove that the dismissal of an employee was not due to one of the prohibited reasons. As such, the state of mind of the decision-maker was an issue in the proceedings and the Court was asked to consider whether the Investigation Report should be disclosed to the Applicant.

Judgment

The Applicant submitted that it was clear that the CEO made his decision to dismiss the Applicant following receipt of the Board’s recommendations. The Board formed a view based on the advice set out in the Investigation Report. As such, the Applicant contended that he was entitled to see the documents relevant to the state of mind of the Board and the CEO, and that includes the Investigation Report provided to the Board. The Applicant also submitted that legal professional privilege had been waived by the Respondent as certain parts of the Investigation Report were disclosed through the Respondent's pleadings and affidavits, which was inconsistent with the maintenance of privilege.

However, the Respondent claimed that the decision-maker was the CEO, not the Board, and accordingly, the Investigation Report was still subject to privilege and should not be produced to the Applicant. Further, the Respondent argued that merely revealing the existence of the Investigation Report or the fact that legal advice was received did not mean that its conduct was inconsistent with the maintenance of privilege.

The Court rejected the Respondent's submissions. It was satisfied that the confidential communications between the Board and its lawyers (including the Investigation Report) was for the purpose of obtaining legal advice. However, the Court held that privilege was waived and ordered the Respondent to produce the Investigation Report to the Applicant.

In its judgment, the Court said that the state of mind the decision-maker was something uniquely within its own knowledge and can only be established by the evidence given by the decision-maker. It was apparent that at least one of the reasons given by the CEO for his decision was that the Board, upon receiving the Investigation Report, recommended that the Applicant be dismissed. As such, the Investigation Report was relevant to the decision to dismiss the Applicant and the Applicant was entitled to dispute the reasons given by the decision-maker's evidence.

The Court identified the circumstances in which privilege would not be waived, namely:

A mere reference to legal advice; or

A reference to a decision having been made after consultation with lawyers.

However, the Court found that because the Respondent's pleadings and affidavits specifically raised the Board's reasons for recommending the termination of the Applicants employment, it would be unfair to the Applicant to allow the Respondent to rely on those pleadings without disclosing the factual basis for those recommendations.

Take Home Points

This case highlights the dangers of having a number of different parties involved in the decision-making process and engaging lawyers to run a misconduct investigation and provide advice on the same matter. Employers should plan carefully when there may be a risk of adverse action proceedings and consider taking the following steps:

Separate the roles for conducting an investigation, providing advice and making decisions;

Documents in relation to an investigation should be prepared separately from the advice documents;

Limit the number of people involved in the decision-making process; and

Provide well documented reasons for the decision and be mindful of correspondences and references to legal advice.

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